Thursday, August 27, 2009

Not much it would seem, if you relied on the mainstream media. When this type of stuff happened under GW Bush it was headline news and evidence of how catastrophic his Iraq policy was. The death toll was conveniently provided on a daily basis back then.

I've said this repeatedly and I'll say it again. That is a part of the world we are best served to leave alone. There are real terrorists there. They do want to kill Americans. But there we are best served by a defensive strategy. Going there on the offense is a no-win situation. Defensive strategies that contain the potential damage are sometimes appropriate. There are simply too many potential suicide bombers who have nothing to lose and do not place much value on human life in that region for us to win by going head-to-head. Yes, Iraq is different than that place. There are a number of criminals in Iraq to be sure. However, Iraq had and still has a good chance of entering into the modern world. Relatively speaking, I do not believe that to be true of Afghanistan and the tribal regions of Pakistan. We need to get out of there as soon as possible.

Wednesday, August 26, 2009

Senator Ted Kennedy died last night. In the article it was stated that during the course of his 4 decade career in the Senate he "helped enact measures to protect civil and labor rights, expand healthcare, upgrade schools, increase student aid and contain the spread of nuclear weapons. "There's a lot to do," Kennedy told Reuters in 2006. "I think most of all it's the injustice that I continue to see and the opportunity to have some impact on it." Later, the article quotes him "I've benefited from the best of medicine, but I've also witnessed the frustration and outrage of patients and doctors alike as they face the challenges of a system that shortchanges millions of Americans."

As I read the article I thought about how wonderful sounding and pretty noble are these ambitions. On the face of it, who doesn't care about upgrading schools? My kids go to school. I want that. The spread of nukes? It's no good. Stop it. Healthcare for all? It would be great if all Americans could get the same care as Ted Kennedy. Who could be against that?

And yet, after over 4 decades, what thwarts these grand goals? Perhaps reality? Maybe? The problem for liberals, and why I can't be a liberal, is because society is far too complex for simple prescriptions to the challenges Ted Kennedy fought to remedy. And government solutions are not the best mechanism for addressing such inequalities. They actually can serve to hinder remedies. If the answer to every social problem were to have the government spend money or set up a program or provide a direct remedy for it, our myriad of problems would have been solved already.

Unfortunately, anyone who lives life recognizes over time that there are limits to what you can do in terms of time, money, energy, and people. As you mature you realize there are things you can and cannot do. Neither you can nor "we" can achieve all we set out to do. Americans of a college age are fed the idea that they can and should do something to change the world in one way or another. Often, as President Obama said at a college commencement speech, it is recommended they find meaning in their lives by doing government service rather than the menial, apparently empty pursuit of a business career.

I would suggest that the best place to start seriously addressing these problems is to start from the bottom up. You can start by being a faithful friend, spouse, employee, father, student, neighbor. Start local. If our energies were more directed to helping people develop strong character we might find that over time we actually have less social problems to address. Unfortunately the same liberal people who care about people in general don't stress individual character. They focus on the need for community and tolerance and the need to live well together. But how can that be successful if uniquely individual traits such as integrity, honesty, knowing right from wrong, and generally being responsible for your own actions is not stressed? You can't have a strong communal character if a collection of strong individuals with character don't exist within it. To develop character traits you do have to make judgments about what constitutes right and wrong behavior. Liberals are harsh judgers in the few areas they allow for it. But they don't focus on essentials. Government and a stress on community morality plays a role. But it is not nearly a complete answer.

This is not an excuse to be passive and sit back and watch injustice. Conservatives should be and actually are in my experience very passionate in supporting the local activities that make up a better community. That's good. That's more lasting. That's a reason I am a conservative who never got swept up by the grand sounding rhetoric that we should use government to solve every problem as Ted Kennedy espoused.

Hopefully Ted Kennedy will rest in peace. Hopefully we who follow him will be a bit more realistic, mature, modest, and local in how we approach solving problems. While it is foolish to think we can have heaven on earth, we may find we achieve greater success than he did if we go that route.

Tuesday, August 25, 2009

President Obama has slammed his internet, cable TV, and other un-American critics, like those who have gone to recent townhalls, for putting forth "outrageous myths" about his healthcare reform plans. Here are just a few myths to consider:

1. Death Panels. I blogged about this in a previous entry on August 16. To sum it up, yes there are no direct calls for a panel to decide who lives and who doesn't. If my brain shut off at that point and I were inclined to go watch daytime's Jerry Springer or Dr. Phil now I might be content to say "of course there'll be no death panels." However, by "cutting costs" at the same time you're adding to healthcare rolls and eventually rationing healthcare due to budget constraints, as happens in countries where socialized medicine has occured, you will eventually need to convene folks to decide how to best allocate scarce resources. In this case, the scarce resource is time, money, and doctor availability, and the person to whom this resource may not be allocated to is granny. A public option is a highway to socialized medicine. If you read this blog and you still don't understand this by now, go back to bed. I can't help you at this point.

2. End-of-Life Decisions. This is very similar to number one. No. There is nothing explicit on page x, y, or z on any of the healthcare bills that I haven't read that directly says anything along the lines of "granny: you've lived a long life. Don't you think it's time to go now? Living another 6 months will cost us too much. Do it for the team. Pull the plug." However, it is not unreasonable to infer that if this is passed, these decisions will take on more importance. We have an ageing population and scarce reasons. An insightful person could surely piece together how end-of-life decisions will be crucial in the not so distant future in light of massive budget constraints, government debt, scarce medical resources, and a growing number of people on government run healthcare rolls. So it's not in the bill necessarily but should we not really be forward thinking people? Bury our heads in the sand, perhaps?

3. Wait times for surgery will increase. It is getting ridiculous that anybody would consider this argument a myth. Again, budget constraint. Time. Cost. Scarce resources. Are more doctors going to appear? Can nurse practitioners do surgery? Money. Money. Did I say MONEY! Counter intuitively, this actually could be a myth if more doctors pursue specializations in relatively higher paying surgeries rather than lower margin family practices. So, if more doctors go in surgery specializations where the money is, it's possible this could be a myth. Although, the lawyers will need their piece and this could actually discourage it. Overall, this is not a myth because of the experience of other countries with socialized medicine. Prez: Logic is not on your side on this one.

4. Illegal immigrants would get coverage. Well, here the President is clever because they caveat this by saying they wouldn't "automatically" get coverage. But of course they will get coverage because, as the president said a few days ago, we're a compassionate society. I don't necessarily disagree with extending all human beings coverage in dire circumstances. It's just that a myth is not a myth when it's true and you said it yourself Mr. Prez.

5. This would pay for abortion. Again, would it "have to" pay for abortions or would it simply pay for abortions? Just like I don't "have to" have an abortion but if somebody does decide to do so, my understanding is that this will pay for that abortion. It is morally reprehensible to take money from citizens, a majority of whom no longer agree with it, to finance those who do make this ugly choice. The question is if it funds any abortion. If so, than it does pay for abortion and is justly repugnant and not a myth. I don't honestly know if this is in the bill. If not, great. I'm happy to be wrong here if this is indeed a myth.

6. Private insurance will be eliminated. It won't be eliminated but it will sure become an unattractive option for all those now receiving "free" healthcare or to those employees who pay more than 8% of their payroll on providing healthcare. Technically, it won't immediately eliminate private insurance across the board. Down the road it may. In the short term, it will eliminate private insurance options for many individually because their employer will drop it and/or they can't afford it on their own as compared to the "free" or cheap public option subsidized by a government that doesn't have to earn a profit because they can always print new money. Private insurance can't do that. It depends on who's perspective you are talking about. But from the perspective of many, this bill will essentially eliminate private insurance as a viable option in the near term.

All in all, it's a sad state of affairs when even somebody as dim as me can blow a whole through President Obama's rhetoric. I welcome his attempt to explain this and make clear what he intends. Go sell it. The problem is not the salesmanship so much as the product. You may be able to sell ice to eskimos but don't try to sell me poop in a bag and tell me it's lunch!

Monday, August 24, 2009

I trust that by now everybody who needs a new car and happens to have a clunker to trade in has done so. The program ends tonight. Dealers are assured they will get their money even if the government bureaucrats haven't been as efficient as they no doubt will be with healthcare when it comes to paying them the $3,500 to $4,500 they're owed. It's been a solid couple of weeks of sales for auto dealers with all these new cars movin' on out the door. It will undoubetedly have an impact on GDP and jobs in the next series of reports that come out. Happy days are here again!

And now comes the fun part. As surely as the gimmick spurred new car sales it will crush them in the weeks and months ahead. It's a sad state of affairs. Auto dealers should probably not spend the wad just yet. The likely forecast is rain, rain, and more rain. The busy season was fun while it lasted wasn't it?

Oh and don't forget, soon we will enjoy "Cash for Refrigerators". http://news.yahoo.com/s/bw/20090824/bs_bw/aug2009db20090821304909This sequel is sure to be action packed. So, consumers don't put the credit cards back in the wallet quite yet. You too can be part of $300M taxpayer giveway. The budget wasn't as high as the $3B for the original. But it's sure to have laughs, love, action. Shop early and often. I hear they're already planning for a trilogy to be announced soon at a theatre near you.

Today I left a comment to E.J. Dionne's Washington Post article "Why We Didn't Crash". http://www.washingtonpost.com/wp-dyn/content/article/2009/08/23/AR2009082302034.htmlIt actually angers me that space in a national newspaper is taken up by people who have basically nothing substantive to add to the conversation. Dionne is a good example of a guy who has been around for a long time and is now just someone who is famous for simply being famous. You know him so you read him but the guy is not much more substantive than a fat uncle who cherishes the simplistic lessons he learned at Woodstock.

----Mr. Dionne,The premise of this article is so completely ridiculous, it's hard to imagine how you keep your job. You could certainly argue that Ben Bernanke, who you don't mention by the way, was ultra-aggressive in his handling of monetary policy by essentially printing money via open market operations and holding fed discount rates at 0%. It's hard for banks not to recover to some degree when they have such low borrowing costs and the ability to lend at higher rates.

On the other hand, what fiscal policy measures has Obama conducted that would lead you to believe he spearheaded a "recovery"? The "Stimulus" money hasn't flowed through anything yet. His regulatory actions have, if anything, further confused the markets, and his proposals wreak havoc on business people who need to mkae long term plans. Oh, plus the massive debt that his policies, his, have created. Putting money on a credit card to usher in growth, is not serious policy to lead to sustainable growth.

You proceed to imply that we're out of the mess. You're right in a sense. We didn't crash in the short term due to Bernanke's manipulation of monetary policy. You confidently argue that "things could have been a whole lot worse" but you don't know that. They could have gotten better if prices had been allowed to adjust in various markets and the Obama administration allowed things to fail. There is obvious short term agony in this. But markets work like this and it's best for the general welfare in the longer term and the only way to a sustainable recovery. There are no short cuts. The quicker things fail, the quicker they can adjust provided there is transparency in how policymakers conduct themselves.

You also don't seem to appreciate that investors make long term business cases and this president's intervention is a net negative on that. I can vouch for this with my own company. We are planning cuts in the years ahead and not expecting growth. People form long term expectations. With Obama and bigger government, you don't take risks or plan optimistically if you are even somewhat reasonable.

Friday, August 21, 2009

And that does not include the $1 Trillion plus in national healthcare. That's up from the Obama team's forecast. Over the last several decades we accumulated a deficit of over $11 Trillion, to put it into perspective.

Thursday, August 20, 2009

Our president has declared that "we are God's partners in matters of life and death". As a Christian, I have always believed that God works His will through the people He has created. We are to live by faith knowing we don't understand everything. He certainly loves His creation and gives us gifts, knowledge, creativity, and all that makes up a human person. But partners? I don't know if I am a "partner".

This also assumes the "we" he is referring to is individuals. In that sense no, I am not a partner with God. If he is saying the "we" is liberal democrat politicians and the government in general is a "partner" we have real problems. The government is allowed by God and is ideally intended to serve the welfare of the people in practical ways. Taking it to mean that the government has the authority or in some sense is a unique partner with God or even close to that level is fraught with danger.

I know that I shouldn't give Obama too much credit for thinking this through. He sort of says stuff and you think you get the idea of what he's saying. I obviously don't think he wants to institute a theocracy administered by the Federales. If Obama was a song he'd be good melody, harmony not so great, and the substance of the words would be pointless and circular. He's a good 3-minute tune but you have to make sure you don't think too hard about what he's saying.

Wednesday, August 19, 2009

I have long suspected that American reliance on China to fuel its growth for exports and as the lender who finances our debt has always been suspect to me. China seemingly has pockets that don't end. How is everybody else struggling but they seem flush with cash? How do they do it?

I confess to not having an army of data to support these assertions. Maybe China has been incredibly responsible and foresighted and is well positioned for this time. Maybe, as I've read, China has an unsustainable, easy money policy that may be setting up their economy for a major crash. Plus, it is always easier to grow from low levels but there comes a point when growth rates are harder to come by as you get bigger and bigger. This may not be good long term news for America if our sugar daddy's funds start to go south. I know China has been buying up commodities in everything from diamonds to aluminum to whatever else in places around the world. What happens if these investments don't pan out exactly as envisioned?

I am a little skeptical about China. It's just my intuitive sense that all can't be that great. I think it's something to watch.

Monday, August 17, 2009

Our president is apparently changing his tact on a public option run by the government. Where will we get hundreds of billions in new efficiencies to be squeezed out of America's 7,500 hospitals now? A cooperative. I am a little concerned because with only more than 1300 private health insurance companies in the private market, what will the lack of one more option do? The reluctance to tackle this monopoly is a bit confusing. I guess we'll see the details of our president's new plan when Congress writes it for him. He can't be expected to write his own plan and lead here. C'mon people. You didn't elect him to seriously lead, just to give good speeches, spend trillions of dollars of borrowed money for the short term, and just be a generally cool guy right? He's a great campaigner. Not so great a president.

Sunday, August 16, 2009

Where is there talk about goverment death panels in the recent healthcare bill? As far as I can tell it is nowhere to be found.

Does this mean that because it is not in the current bill in sect. x.y.z there won't be death panels in which government bureaucrats decide whether or not to "pull the plug" on Grandma? No. The problem is that in the long run the cost of providing healthcare will increase dramatically as more and more migrate to a "free" or lower priced piblic healthcare option, and business will as I've outlined in detail in previous posts. As costs increase and run up against a predetermined budget constraint which limits how much more can be spent, bureaucrats will need to decide how they deem it best to allocate scarce resources. Don't worry because the new 150,000 government bureaucrats the Federal government needs to hire to oversee it will do their best.

As these bureaucrats or a national health board or something like that meet they will need to provide guidelines as to what constitutes cost effective treatment. If they have a system with a limited number of doctors and nurse practitioners and a caseload that is more than they can handle, invariably a choice needs to be made given the immediate situation. If this means we have at any given point in time, come say 2022, and there are 8,000 kids under the age of 18 and 11,000 Grandmas in need of immediate care, the kids will get likely get the treatment. Grandma may die. These actions and the subsequent result is probably why some critics are calling it a death panel.

It may be very reasonable in light of the situation from society's standpoint to treat the kids and not Granny. However, the better way is to expand the constraint and not put authorities in the position of having to make such a decision. We should encourage more doctors, improve incentives via having people pay more for what they use, make patients more accountable for their choices, and incentivize industry and especially doctors to integrate technology to better run their practices. Oh, and we need desparately to do away with lawsuits so that doctors don't prescribe treatment and make referrals solely for lawsuit avoidance reasons, as they do in droves right now. To argue that a government public option will achieve these objections and at lower cost is truly laughable and actually a bit embarrasing.

So, yes it is likely that getting the government into healthcare will at some point require death panels. I know it is not explicitly in the bill. The purpose of analysis and an analytical mind though is to draw connections. Any sheep can read something as though its a technical manual on how to setup a stereo. As the President likes to say "I am willing to have a serious discussion" as he trivializes his opposition. So, yes, let's be serious and start thinking about the future consequences of our actions today.

Friday, August 14, 2009

I have mixed feelings about Ben Bernanke, the Federal Reserve Grand PooBa. On the one hand, the man was shrewd. He basically pumped so much money into the economy and kept Fed discount window interest rates so low that banks almost couldn't help but survive. His actions probably did save the economy from a financial collapse. The low interest rates have helped enormously. He's also been fairly transparent and predictable. All the money he's pumped in via open market operations and buying various instruments has helped in the short term. You could certainly argue that he did a wonderful job in the short term. Monetary policy is what is driving this short term "recovery" despite the daily barrage of nonsensical economic policies from our President.

On the other hand, it can be argued that he is artificially propping up a host of assets that need to come down to levels that reflect reality. The school of thought, which I subscribe to, is that the quicker prices adjust, the quicker we can truly recover. The fact remains that people are still borrowing too much and the housing market is still in serious danger. If and when interest rates rise, it will swamp a whole lot of people who borrow, which is most homeowners. His low interest rate gifts can only go up from here. And he can't essentially monetize the debt indefinitely. At some point the private economy has to lead the way out of the recession and not clever Fed policies designed at manipulating key variables.

My own sense is that this recession is different from previous ones. The reason is that some key variables and incentives are in place that likely will not last forever. Interest rates on 30 year mortgages are extremely low and inflation is extremely low. Where can they go? In addition, welfare benefits can't run out indefinitely, an $8K first time home buyers credit will end, and even gimmicks such as cash for clunkers aren't going to be funded for much longer. This is in contrast with 1981-82 where the rates were high and you could see how lowering them could prove beneficial. In that case, there were obvious barriers to growth and obvious remedies to remove them even if they were indeed painful during the cure phase. It's the opposite this time. The barriers are not as clear and the issues are a little more complicated given the breadth of the current crisis.

So while I applaud his efforts given the hand he was dealt, in which he had a part in dealing due to his tenure throughout the decade at the Fed, he cannot change the underlying substance of what's really happening in the economy. Consumers are horrified because of jobs and businesses, including my own, are making business plans that include cost containment strategies moving forward. I don't have a wealth of data sets to pore through as he does. From what I see and hear from people with money is that we will certainly get beyond where we were. How could we not given where we were? But we are not in the midst of a true recovery. That's not necessarily Ben's fault. What is Ben's fault, possibly, is that his policies delayed a true recovery because they were the artificial actions of a technocrat. I can't critique him too much because monetary policy is being conducted in a way that is at least recognizable to sensible people. Fiscal policy is another matter.

There is an economic news report today that retail sales fell 0.1% in July even as the cash for clunkers (CFC) program was in full gear. This was below the already low expectations and surprising to most economists. Why should it be?

If people are incentivized to buy a car wouldn't you think they would have to offset that expense somewhere else? Unless you expect people to buy a new car and stock up on that new HDTV set they've always wanted in the same month. Who needs to have a budget constraint?

This illustrates the short-sightedness of government policy with the CFC program. Retail sales went down in the short term as people shifted the basket in terms of what they bought in July. The government will also find that people will shift their basket over a longer time horizon when auto sales plummet in the late Fall and into the Winter. Why would they do this? Because people with an interest in buying cars are likely to be doing so now. This will likely also happen in home sales when the $8K first-time buyers credit expires in November. You can expect to see home buying retreat late into the Winter and into next year because $8K is a nice chunk of change.

The Obama economists are essentially playing games with incentives motivated by the stuff they learned in microeconomics classes. The idea is that you try to alter behavior and shift the demand curves out by making goods relatively less expensive. These micro-econ models run up against the problem that they aren't taking into account any longer term timeframe due to the fact that the increase in temporary purchasing power will cause the demand curve to shift back in a short period of time. So long as we have good Q3 growth who cares, right?

Wednesday, August 12, 2009

I found something that makes Barrack Obama the greatest president in our history -- in this one respect.

“The Obama administration is projecting that when the current budget year ends on Sept. 30, the imbalance will total $1.84 trillion, more than four times last year's record-high.”

Without the stimulus it may have only been about twice as much.

There is a website I go to occasionally to get deals on cigars (cigarbid.com). I can attest to how spending on stuff you like is addictive. That site is great. Unfortunately, you spend more than you ordinarily would and end up valuing the higher quantity of good stogies you get less. For Obama, at some point no matter how good you think the deals are, you have to stop spending and be disciplined. Whenever I have gone on a spree at cigar bid, I am reminded of my stupidity when it shows up on my statement at some point. I don’t think Obama’s got that bill yet. Or maybe he really doesn’t care about it since we need 3rd quarter, credit card inspired growth… All he wants, I think, is your approval for the illusion that he's turning things around in the here and now.

Tuesday, August 11, 2009

President Obama gave an analogy today about FedEx and UPS doing better than the Post Office. The implication is that if we have a "public option" your insurance plan and private insurance will do great. Of course, all he wants to do is give a menu for people to choose. Who can be against something so simple? C'mon people. Is he saying that because the Post Ofice sucks, his public plan will also suck? Why introduce it if it's going to suck? I don't know... who can understand the point of today's lesson in Obama-World rhetoric. A couple of things to note about this.

First, healthcare is infinitely more complex than a postal delivery system. To be sure, FedEx and UPS have advanced supply chains and excellently integrate technology into their business processes. But it is a fairly simple system to understand from point-of-order to point-of-delivery even if the quality of the execution differs between FedEx and the Post Office.

Second, the Post Office doesn't have as many stakeholders nor does it make life or death decisions. It doesn't make up 1/6th of the U.S. economy. Nor does it have major medical and technology advances that make treatment life-saving but also expensive.

Third, the government doesn't require certain mandates on what FedEx or UPS can or cannot deliver. UPS doesn't have limits on what it can charge or who it can serve or where it can go and when.

Fourth, Obama is not simply offering another option. There are already over 1,500 insurance options for people to choose from regardless of their employment. He is pricing it (8% payroll tax and a 2.5% individual tax) in a way that makes it fairly compelling for small to mid-size employers to switch. It is also clearly a bridge to a national healthcare plan and results in significant new taxes (up to 5.4%, and sure to grow, for the evil millionaire people) to fund it.

This is not an exhaustive list. But the bottom line is that comparing healthcare to delivery services is another example of how Obama is adept at creating false arguments to show a supposed parallel. This type of misdirection is actually condescending if you think about it. He is very good at offering rhetoric. He doesn't offer solid analysis but for people who aren't all that thoughtful and/or don't have the time to really think about what he's saying, you might be charmed.

Friday, August 7, 2009

Following on the previous post, I can't help but think it is bad news that 637K people dropped out of the labor force in one month. If they had stayed in it during July and been counted as unemployed, the unemployment rate would have actually been 9.8% insted of 9.4%. This variable goes up and down from month to month. When people are encouraged and out looking it tends to go up. When they're not, they drop out. Plus, the third paragraph of the BLS release says that 584K additional people in July are now considered long-term unemployed. That's a massive number by the way.

Suppose all 637K people re-enter the labor force and come back and don't find work during August and there is another 300K job losses. The 637K plus the 300K assumed new job losses would be added to the existing 14,462K. This would amount to 15,399K unemployed persons and an unemployment rate of exactly 10% assuming the total civilian labor force stays constant at 154,504K people. So how does a massive rise in this number portend a recovery?

Call it a mystery and get Sherlock Holmes on the case because I want to know why so many people are no longer counted as being in the labor force? Did these people drop off the face off the earth? I know we're looking for good news. But geesh! Have we all lost our minds?

It's interesting that if you look at the actual BLS website http://www.bls.gov/news.release/empsit.nr0.htm report in Table A, that the civilian labor force and actual employment is shrinking and that the number no longer considered in the labor force is increasing. This indicates that people are dropping out of the job market and are no longer apparently looking for work. This would not be counted in the unemployment rate but is very real if you are one of those 637K people who dropped out in the month of July.

It looks like manufacturing was the big gainer because GM and Chrysler plants reopened. Manufacturing still lost jobs but not by as much in past months. Government, education, and health, and tourism were the only industries that actually gained jobs. It will be interesting to see over the next several months if the dribs and drabs of job losses and if private sector job creation will occur outside of the basic staples that did report job growth. In the months ahead, you should expect to see manufacturing and construction job growth due to the government credit card spending. Of course that's not real long term growth, just a wealth transfer from taxpayers via government spending. It will also be interesting to see what happens in housing now that the prime buying season is coming to an end and banks are picking up the pace on foreclosing.

We are not yet out of the recession and into recovery. We will recover when professional services, retailers, and manufacturing (not due to government spending) start to hire. It is always the private sector that leads to a recovery. Government, education, and parts of healthcare do not meet that criteria.

Suppose you work for a company with 50 people and everybody's salary is $60K annually. Your employer has a payroll of $3M. They currently provide everybody with a healthcare plan that costs them $600 per month, $7,200 per year per employee. You pay the remainder. The $7,200 per year times 50 employees amounts to $360K per year that they have to pay to compensate their employees for the healthcare benefit. In addition, it is very typical for the employee to kick in something, usually about 15% to 25%. Suppose, for the sake of this example, you kick in an extra $200 per month or $2,400 annually. This adds an extra 120K to the cost for all 50 employees.

The employer now has a "public option" to pay an 8% tax on his payroll of $3M. This would cost them a total of $240K. Compared with the $360K they were paying and the additional benefit of $120K that employees no longer have to pay this is a total benefit now of $240K (from $360K + $120K - $240K = $240K). This amounts to a $4,800 per employee. I am a little unclear on how the 2.5% income tax on individuals who don't have insurance works. But if it applies to the $60K earner it amounts to $1,500 per employee. This too is cheaper than the employee paying the extra $200 per month previously. If I understand it right, this tax would reduce the $120K of the employee share amount down. The 50 employees would pay $75K now instead of the $120K they currently have to pay. Still a compelling reason to "voluntarily choose" a "more competitive" public option because of the way the feds have priced this. This only compares the current out-of-pocket and not the future out-of-pocket costs more likely to be incurred if employees working for a private option company get insurance on their own.

The argument President Obama puts forth in support of this is that if you like your health insurance you can keep it. Maybe. Maybe not. If your employer decides to pay the tax you have to buy it yourself out of pocket. Buying a personal family plan can easily run between $500 to $1K per month. Compared with just paying $1,500 annually or $125 per month, you've got to really love your private health plan. Suppose the employer does decide to keep private insurance. If his competitors do not, they can cut costs and can sell what they're offering at less cost. There is also a proposal to add a tax to employers who keep private insurance though the rate is still TBD. This would make it even more expensive for an employer to maintain private insurance and the incentive to move to public would be greater still.

Ultimately, costs get passed on to consumers. This hurts the company who doesn't go for the public option. The employees will likely have to take a pay cut to compensate for the high benefit cost. The competitors with the public option company may increase salary because they get lower quality healthcare. Overall, workers who don't value health benefits will be likely to go to a job with a public option and vice versa.

Overall, there are serious ramifications to the health proposal that I don't think policymakers are seriously advertising. This bill is very likely over time to further complicate long term employment and is likely to usher in a higher "structural unemployment rate" as is the case in Europe where they routinely have 10% unemployment rates due to these types of policies. Maybe this is what America wants. Obama repeatedly and clearly said he was going to remake America. Is this what you had in mind?

Wednesday, August 5, 2009

Earlier I heard about how our uniter, post-partisan President Obama took a shot at the "Brooks Brothers crowd" who is protesting the trillion plus dollar healthcare plan he's proposing at town hall meetings throughout the country. Since I like to wear Brooks Bros, I enjoyed this comment from our man who pledged to bring us together.

This reminds me of the ridiculous types of speeches FDR used to give about the evil rich. I especially liked his "grilled millionaire" speech for its simplistic stupidity in advancing class warfare. Have Brooks Bros wearers become the new face of evil in America? Who knew? I just became a member of this crowd because I like the non-iron shirts.

It looks like the Senate is going to extend the "cash for clunkers" program. They spent $1 billion so far and now are going to add another $2 bills. It's shocking that this is now considered such a low amount. Hey, only $3 billion total! We got away cheap today.

At what point does the Obama administration and Congress feel that they're spending too much money? Do they have an arbitrary number they might reach where they say, ok we won't spend another trillion or hundred billion or whatever else this year? I realize federal budgeting is not exactly like personal budgeting since I can't double my spending and than just print more money for myself or tax others to get the extra income I need to support my extra spending. But still. Doesn't there come a point when somebody in charge becomes seriously concerned about the spending? Just curious.

Tuesday, August 4, 2009

The following picture tells a thousand words. It shows how individual and corporate taxes paid to the federal government have plummeted during the last year. Yet, we are spending trillions and starting a new major public healthcare option that will eventually lead to socialized medicine. I guess so long as the credit card spending hits in the 3rd quarter and GDP goes up temporarily, it's ok? Equating Federal tax revenue with federal spending would be a responsible policy. The revenue is the source of all the federal spending that Obama wants. At some point the well runs dry. This is not just Obama's doing since previous presidents have run budget deficits. But Obama is taking deficit spending to levels that are well beyond what his predecessors did for a false hope called "stimulus". If ever we needed a pro-business economic policy and a president and congress who understood how to help business it would be now.

Monday, August 3, 2009

There aren't enough primary care doctors to support a national health "public option" sort of system. So get to know your nurse. You'll soon be seeing more of him or her...

This is actually an interesting idea. It's a way of getting around the doctor shortage problem and having lower paid people do diagnosis that doctors previously did. It's virtue is lower cost. Its drawbacks are:

It is hard to argue you would get better quality care overall. Even though doctors don't spend more than 5 or 10 minutes with their current patients, why should we believe NPs would do so? You would now get 5 minutes with an NP rather than a doctor.

It's also hard to believe that nurse practitioner's wouldn't eventually demand higher salaries given that their workload and responsibilities will dramatically increase. So in the long run the cost savings would thin out a bit.

Would have to be concerned with legal issues if lesser trained NPs prescribe medicine and have more errors relative to the doctors they're replacing. I've got to believe there will be some lawsuits involved with NPs recommending things that may be above what they know.

Are NPs currently doing nothing at a hospital? I assume NPs are busy and that they're not idle. So where is the new army of NPs going to come from to replace or takeover from doctors the influx of caseloads? Isn't this just a shortcut where the idea is to train people on a relatively easier track than the M.D. route?

Could lead to even more specialization for better doctors. If a doctor is now essentially doing the same thing as an NP or just an overseer for extreme cases the NP can't deal with, why would they get a massive pay boost from a hospital if NPs are doing most of the work? If a doctor is good, why would they put up with getting squeezed by a government payer who is looking to "save money" by paying them less?

Overall, we're now ratcheting down the visit a notch. But quality will be the same. What do doctors know anyhow? We should have done this years ago (assuming it was just this easy).

It may take 15-20 years to get there because he said you can't get there immediately. But the man has a plan even if he's not honest and open about it.

This is why people distrust politicians so much and why Americans have become so cynical about the whole process. If only they would lay out the issues in an honest and open way they might get more respect. On the other hand, they are probably right in calculating that we won't vote for them if they are open and honest. It's an awful feedback loop. The country is becoming worse off with every day that passes because of it.

I hope you're not surprised. A profound rock band once sang a dittie called "every road has its thorn." America's stepping into bushes we've never stepped in before, at least not during peace time. So eventually you're going to get pricked by one. Every cowboy's going to be singing a sad, sad song after the Obama experiment.

Saturday, August 1, 2009

The economy (in terms of GDP specifically) is actually likely to grow modestly in the 3rd quarter and into the 4th quarter. This also depends on the housing market and whether or not the housing market dries up and foreclosures rise due to increasing unemployment. So it's not a sure thing.

The reason is that any improvement over a dramatic decline will result in relatively higher growth rates. The primary item that will drive modest short-term growth will be business purchases. The businesses that are still surviving did not buy new products and buffer up their inventories during the dramatic decline late last year into early this year. Businesses essentially ran down what they had on the shelves and it's about ordering time.

However, after that runs its course the sugar high due to all the government borrowing, monetary policies such as zero interest rates and money printing because the Federal Reserve is buying treasuries (which floods the economy with cash to those from whom it buys them), and Obama policies being enacted will bring us back to a day of reckoning starting later this year and into next year. A portion of the short-term porkulus money will also create some jobs for some such as my iron-worker friend.

But all in all, my predictions, which I made for the end of 2010, still hold. I see nothing yet to change my opinion of the course of events. We will float through this year with the major economic indicators topping out and leveling off. During the next few years the bill for the credit card borrowing will start to come due. Eventually, we have to pay off a few trillion that we've borrowed. Unless the economy dramatically reacts to it and pulls off some major growth, we're in some real long-term trouble with that. We will have social security, medicare, and the unveiling of yet a third major entitlement to fund - a growing national health care program. Long term it's not a pretty picture.

I'm reminded of what John Maynard Keynes said "in the long term, we're all dead". That seems to be the view of the president. Live for today and let somebody else worry about tomorrow.

News that GDP fell by 1% instead of the 1.5% that economists expected has been taken as a sign that happy days are here again. Maybe they are.

The unemployment numbers will come out next Friday. I guess the best approach to take is to say that we expect them to go from 9.5% to 12%. When they come in at only 9.7% because only another 400,000 people lost their jobs we can all celebrate the good news.

This latest news is being touted, by Obama and his essentially state-run media mouthpiece, as a sign that Obama's combination of tax cuts and government stimulus are working. The two main drivers of growth were government and net exports, not consumption and investment (from the classic Y=C+I+G+nX macroeconomic model). The third quarter is going to be gangbusters and from here on out we should be cautious but assured that the steps our president has taken have enabled us to move forward. Thank you leader. For it was your noble actions of borrowing and ramping up the debt that has led has out of this morass.

Cash for clunkers may add huge numbers to economc growth over the next quarter by having government borrowing prop up car consumers and dealers. Hey, what's a few billion in taxpayer money to subsidize it? I like having a portion of the taxes I pay go towards giving my neighbor a $3,500 to $4,500 discount on his new car. Once the guvmint "freebie" ends it is likely car sales will go back down. What does it matter? We're happy now, GDP will probably grow because of it in the 3rd quarter, and progress is being made so shut your cakehole!

At this point, any good news is welcome. The fact that things aren't as bad as they could be or were is encouraging. This is truly a lesson that if you have low expectations, you will be rewarded if you make any progress. My goal for today is not to hurt my back and to get enough oxygen so I can breathe. Also, maybe I'll take out the trash and walk around a little. If I can do all these things I will declare it a good day.